3DS: Is It Failing At Retail?

And a look at Japan's July hardware sales.

Greg Aldridge, 4 years ago, 39 comments.

The format of this month’s Japanese sales retrospective has been tweaked somewhat. Having been writing these for the best part of two years now a minor refresh is long overdue. Your feedback and suggestions are welcome in the comments as long as they are polite.

One thing that will not be changing is that these blogs begin with a look at some aspect of the Japanese video game market. In previous months this has been topics like taking a look at how the 360 is performing in Japan as it approaches a sales milestone or contrasting this year’s hardware sales with last year’s. Given recent news stories the decision of what to look at this month was a no-brainer.

In case you missed any of it, here is a brief recap of news revolving around the 3DS’ sales performance in the last week or so. Like Sony’s, Nintendo’s latest quarterly financial update was not a pretty one. With the value of its sales down 50% compared to a year ago (though its overall financial result was actually slightly better) and many questioning the sales performance of the 3DS, Nintendo announced a significant price cut for the 3DS.

From the 11th August the 3DS’ manufacturer’s recommended price will drop from ¥25,000 ($249.99) to ¥15,000 ($169.99), with the European price dropping by a third. Existing owners, if they visit the eShop before the 11th, will be enrolled in the Ambassador program which will eventually give them 20 free games in compensation for being early adopters who paid the higher price at retail.

The repercussions of the worse than expected financial performance and 3DS price cut, as is so often the case in our always-on world, were immediate. Nintendo’s stock dropped 21% as shareholders considered the much reduced profit margin on 3DS hardware sales and the company’s President, Satoru Iwata, told shareholders that he would take a 50% pay cut and that other directors would also take significant hits to their salaries.

All of which seems pretty catastrophic and makes you wonder just how badly the 3DS has been selling. Fortunately that is something we can take a look at. The perceived wisdom is that it is tanking at retail with some less informed comments even going as far as to suggest it is failing to the degree the PSPgo has. Let’s deal with that latter misconception first.

Japan is the only territory that we can obtain unit sales figures for the PSPgo from, though anecdotal worldwide reports and Sony’s discontinuation of the console suggest the worldwide picture was similar. Back when the 3DS launched in Japan we produced a graph comparing its first month sales to those of the PSPgo. Here is an updated graph providing a normalised comparison of how things have gone since:

3DS in red, PSPgo in blue

If you hear someone comparing the 3DS to the PSPgo and suggesting they are both a failure of a similar scale please feel free to correct them. Is the 3DS a sales failure at all though? It used to be that a new console from a manufacturer would immediately replace its predecessor at retail. That is no longer the case so the 3DS is competing, to a degree, against the DSi and DSi LL/XL, much like the PS3 was competing against the PS2 at its release.

Let’s look at that latter Sony sales competition first. In it’s first four quarters on sale, worldwide unit sales for the PS3 were 1.7m, 1.8m 0.7m and 1.3m for a total of 5.5m. During those same four quarters the PS2’s sales were 6.7m, 2.4m, 2.7m, and 3.2m for a total of 15m.

In its first ‘financial year’ on sale the PS3 was outsold by the PS2 by a ratio of almost 3-to-1. Yes, there are a lot of factors contributing to the differences between those numbers but they are an example of overlapping console lifetimes for which the numbers are readily available. Sony were not outwardly showing signs of ‘panic’ a few months into the PS3 lifetime, they knew they were playing the long game with the PS3.

Nintendo’s reaction to the 3DS’ early-life sales looks like that of a company that has become used to its consoles being instant hits at retail. Its shareholder have also come to expect that and so the perception that the 3DS is failing at retail has had to be addressed.

Is it failing though? We took a detailed look at 3DS’ sales performance at launch compared to the DS and Wii once it had completed its launch in all regions. Here is the comparison graph from that earlier post:

When you consider that the overall video game sales market has been contracting for several years now, that the economies and consumer spending in the ‘developed’ countries are still suppressed, and that the 3DS launched at a much higher price than the DS (even taking inflation into account) then it is difficult to say its launch performance was poor.

Nintendo’s latest quarterly financial update gives us the data we need to take at look at how its consoles have sold worldwide for the months of April through June. What that data does show is that the 3DS is really struggling in Nintendo’s largest market; America. Here’s another graph for you lucky people:

In Japan the 3DS is outselling the various DS’ by about 2-to-1. In ‘Other’ (Europe, Australia, etc.) that ratio is reversed. In America however, the DS’ are outselling the 3DS by 5-to-1. That’s not the only area where America stands out, look at the DS’ sales. You can see why Nintendo has not yet discontinued the DS Lite in America; it still makes up almost 50% of all DS sales there during the quarter.

Those numbers from America provide all the explanation we need about why Nintendo has slashed the price of the 3DS so soon after launch in an attempt to “create momentum for Nintendo 3DS and accelerate its market penetration toward year-end sales season, when the lineup for the applicable software shall be enriched”.

If the 3DS was performing at retail in America as well (or as badly, depending on your perspective) as it is in the other non-Japanese territories then it would be unlikely that Nintendo would have seen the need to drop the price so aggressively. As it is, all of us who have already or will in the next six months purchase a 3DS are benefiting from its staggeringly poor sales performance in America.

Japan’s July Hardware Story

The overall relative performance of each of the consoles currently on sale in Japan is fairly well established, so each month we will just look at any cause of significant changes in relative sales and perform our usual quick overall corporate pie-sharing exercise. The regular set of graphs and table will feature in a gallery, like so:

Topically, the middle of July saw Japan’s 3DS sales leap upwards enough for it to outsell the PSP-3000 for a couple weeks and take the overall monthly handheld top-spot by a whisker. We only have to look as far as Fox McCloud for the reasoning behind the sales spike as it was the release of Star Fox 64 3D that sent 3DS sales barrel-rolling into the stratosphere.

The over notable deviation from normal sales levels was the Wii’s performance in the latter half of the month. The software driver behind those sales was Rhythm Heaven which topped the software charts for those two weeks, a feat unusual for Wii games in recent months.

Now for our regular quick look at comparative performances. Across the month the PS3 outsold the Wii by almost 50% (90,269 vs. 62,651) while Nintendo’s handhelds beat Sony’s by about 33% (156,985 vs. 116,506).

Overall shares of the month’s console unit sales saw Nintendo just manage to come out on top. Out of the 439,106 consoles sold Nintendo accounted for 50% (219636), Sony 48.4% (212,558) and Microsoft 1.6% (6,912).

Apparently, I think this is Japan only, the pre-owned 3DS sales since the price drop announcement have been more than double the retail sales. It’s to be expected that pre-owned sales will increase, but more than double? Wild.

The price of releasing before the traditional low sales summer period, so that you’re established in the market with a small back catalogue of games & pricedrop in time for the busy Christmas period where millions are sold?

Which is why any hardware release can happen when the manufacturers are ready. The Vita being a 2012 launch is hardly a problem and it will gain its own momentum, hopefully, regardless of it not making this Christmas. I’m sure Nintendo will have a fine catalogue of fresh, new games to tease customers with come Crimble-time. :)

If you look at the positive sales of the PS3, the biggest factor was that initial price-point in holding it back. Nintendo have addressed this early on and will surely reap the rewards down the line.

Yeah totally, better games are already out there with better graphics as well on smartphones, i touches, fb, hell even PSP. And the vita will only be better. That’s why there’s no room for a 3DS in my life anyway, and i know that’s a fact for everyone i know too.

Now I’m a Sony fan boy and will get the Vita at launch (tempted by a Japan import), but I have to admit that I’m impressed with the graphics on the 3DS. It’s better than the PSP and Wii, plus I always find that 3D seems to make resolutions better than it would look in 2D.

Mostly bought for Zelda (as I’ve never played it), but hopefully Starfox and the promise of the free games will keep my attention until Mario Kart comes out.

Best portable out at the moment – perfect if you want a stop gap between PSP and Vita.

Great stuff, Greg. I think most people here recognised it had underperformed (a bit) but was still doing okay. However, Nintendo aren’t happy about a few key things and have hopefully addressed that with the price cut. The Americas was particularly surprising. They really are just leaving it on the shelf, aren’t they.

The patriotism/loyalty to their own hardware is almost impossible to break. Americans are very loyal to their own companies too so Son¥, Micro$oft and Nint€ndo all have their work cut out in different regions. Oooo… look. Characters!!! :-)

It seems pathetic that someone’s dislike of a company can get to imbecilic levels where they can’t type their name in without including a dollar sign (for example). All of the console companies want out money. Apple too. They’re in this for the money. Microsoft are an easy target due to how they’ve monopolised the PC world but we can still be mature enough to refer to them without petty dollar signs as if they’re the devil compared to every other company that wants our money.

I think people also decided pretty early on from when they released it’s specifications as to whether they wanted one (such as battery life). I don’t think a price cut will save the console, Nintendo are still too dependant on their own bunch of…. colourful, characters, franchises and gimmicks, and the third-party support is abysmal even at this point.

I wasn’t necessarily targeting their franchises as something that isn’t profitable, but that Nintendo’s franchises seem to leave little room for other developers, and I still feel that there will be a point where it’s brand strength will decline with the presence of other creations and innovations in the future.

Agreed. Nintendo’s franchises seem so strong that other titles barely get a look in sometimes. It feels harder to get a franchise up and running with Ninty than other platforms. Sorry if I have digressed. :-)

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